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03 Feb 2021
3 min read

Amazon, Alphabet Beat Earnings as Shares of Both Rise

Amazon, Alphabet Beat Earnings as Shares of Both Rise

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Key Takeaways

  • Amazon, Alphabet earnings top analyst estimates
  • Jeff Bezos to step down from the role of Amazon CEO

Amazon and Google-parent Alphabet released their latest earnings reports yesterday evening after the closing bell. Both companies beat analyst earnings and sales expectations for the fourth quarter. Additionally, the bigger news for Amazon this year may have been that Jeff Bezos stepped aside to become the executive chairman of the company.

Amazon announced its Q4 results on Tuesday evening, along with the message that the founder and CEO Jeff Bezos will step down this year and hand over the role of chief executive to Andy Jassy, Amazon’s current head of cloud division. Jeff Bezos founded Amazon in his garage in 1994 with his ex-wife MacKenzie Scott as the accountant, the future CEO Andy Jassy joining the company in 1997. Since 2003, Mr. Jassy has been at the helm of Amazon Web Services (AWS), a subsidiary of Amazon. “Right now, I see Amazon at its most inventive ever, making it an optimal time for this transition,” said Jeff Bezos in a letter, adding that he “never had more energy, and this isn’t about retiring”.

Amazon shares were up over 1.00% on Tuesday and now indicate a higher open of about 0.30% in pre-market trading. For the fourth quarter, Amazon reported revenue of $125.55bn, beating the analyst consensus of $119.72bn. This marks the first $100bn sales quarter for the eCommerce company. Earnings per share arrived at $14.09, nearly double the $7.30 analyst estimates. Operating income for the company came in at $6.9bn together with a net income of $7.2bn.

Pandemic Fuels Amazon’s Sales

For Amazon, the pandemic-fueled 2020 goes down in history as the best year in terms of financial results driven by a surge in online shopping amid lockdowns around the globe. In 2020, Amazon sales rose 38% on an annual basis to $386.1bn. Jeff Bezos will step down from the CEO role in the third quarter of 2021 to become executive chairman, focusing on innovation.

Google-parent Alphabet was the other widely anticipated company to report earnings yesterday. Alphabet announced another blowout quarter, topping analyst estimates. The search, advertising, and cloud-technology giant reported earnings of $22.30 a share on revenue of $56.9bn. Analyst consensus stood at $15.90 a share on revenue of $53.13bn. Chief Executive Sundar Pichai credits the results to the accelerating shift to online services and cloud technology. Alphabet’s revenue rose 13% in 2020, boosted by increased demand during the holiday season. The current fourth-quarter report is the first one to divide earnings statements into three operating segments: Google services (advertising, YouTube, hardware, apps), Google Cloud, and what the company called Other Bets.

Google services were by far Google’s strongest revenue generator since it brought $52.9bn in the fourth quarter. Cloud revenue arrived at $3.8bn while Other Bets generated $196mn. From digital ads, Google took in over $46bn in revenue, with $6.9 coming from the growing advertising business on YouTube.

The better-than-expected results boosted Alphabet shares by nearly 8% in the after-hours trading, bringing the stock to a 52-week high ahead of the opening on Wednesday.

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